Corporate reputation may not be “everything.” but it’s substantial, according to a new study.
Echo Research and Reputation Dividend reported today that a company’s corporate reputation is worth, on average, 26 percent of its market cap. That means before you say a word, develop a product, design an ad, or discuss your corporate strategy with analysts, your reputation stands for — creates — substantial corporate value.
Apple has the most potent corporate reputation, worth 58% of its shareholder value, according to the study. The reputations of ExxonMobil and Chevron followed in the rankings, at 56% of shareholder value each. … Phillip Morris International, Procter & Gamble, McDonald’s, Walt Disney, IBM, Intel, and Google round out the top 10 companies with the most potent reputations.
Good for them. Now, for the bad news:
Companies with the least valuable reputations included Best Buy, Sara Lee, and Sears Holdings. … E*Trade Financial, Family Dollar Stores, SuperValue, Coventry Health Care, Boston Scientific, Dean Foods, Advanced Micro Devices, and Sears Holdings were among the companies with the least potent reputations.
To belabor the obvious, reputation provides value. Strong ones add value; weak or negative ones hurt market capitalization. Simple equation, but easy to lose and hard to regain.
Let’s first discuss how to maintain a strong reputation. Companies must produce valuable goods or services and do so in ethical, transparent, ecological and beneficial ways. Think Apple. Customer service is huge these days, as is value and durability. Honesty still stands for much.
On the downside, any of the above that fail damage company reputation, and cost the company money and reputation.
But in the Apple example lies peril, as well. If 58 percent of the company’s value depends on what is now a fine reputation, the stakes are even higher that it maintain and improve its reputation. Recent stories about lower-cost factories in China churning out IPads and IPhones prompted rapid response from Apple to explain and investigate those plants. Apple managers a hyper-sensitive to reputation.
Crisis management, especially in the digital age, is crucial to maintain or enhance reputation during a threat. And it provides opportunity for lower-ranked companies to rebuild their reputations. Leadership, transparency, honesty and new direction can often emerge from a well-handled crisis.
What’s at stake? Overall, reputation comprises more than $3 trillion of market cap in the S&P 500 Index. Wow.
The content of this blog is about crisis management and mismanagement in a digital age. It originates with Steve Bell, who spent 30 years as a journalist for the Associated Press and in four top editor positions at The Buffalo News. He is now Partner/Director of Public Affairs at Eric Mower + Associates, one of the nation’s largest independent advertising, integrated marketing and public relations agencies, with seven offices in the Northeast and Southeast. Learn more about EMA at www.mower.com. Steve’s blog is based on his own opinions and does not represent the views or positions of Eric Mower + Associates.